Will Petrol And Diesel Be Brought Under GST?

New Delhi: Come Friday and the GST Council might consider taxing petrol, diesel and other petroleum products under the single national GST regime. The Council, comprising central and state finance ministers, in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on COVID-19 essentials, News18 reported quoting sources.

GST is being thought to be a solution for the problem of near-record high petrol and diesel rates in the country, as it would end the cascading effect of tax on tax (state VAT being levied not just on the cost of production but also on the excise duty charged by the Centre on such output).

According to tax experts, bringing petro products under GST will be a tough call for both the Centre and states as both will stand to lose. The BJP-ruled states like Gujarat will be a loser even if a product like natural gas is brought under GST as it gets a lot of revenue from taxing the local production and import of the fuel (LNG). The Centre will also lose as the majority of the Rs 32.80 per litre excise duty on petrol and Rs 31.80 on diesel is made up of cesses, which it does not share with the states. Under GST, all revenues will be split 50:50 between the Centre and the states.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, in its September 17 meeting could also discuss the modalities of continuation of compensation cess beyond June 2022. This is the first time in 20 months that the GST Council will have a physical meeting. The last such meeting was on December 18, 2019, before the COVID-19-induced lockdowns, the report added.